How to Build a Sales Forecast Model

In an ideal world, sales teams and business leaders would have crystal balls to help them predict accurate sales forecasts.

With these predictions, it would be easier to create budgets, set goals, know when you’ll need to hire more people, and so much more.

Unfortunately, crystal balls belong in the movies, and predicting anything in business, especially revenue, can be challenging.

Then what’s the best way to go about creating sales forecasts for your business?

Firstly, you need to understand what forecasting is.

In a nutshell, a sales forecast is your predictions of what you will sell weekly, monthly, quarterly, or annually.

An important element for forecasting is to be more realistic than hopeful. Too often, sales teams will be overly optimistic when setting goals.

This, unfortunately, leads to disappointment when you’re halfway through the year and your team starts realizing that you’re still far from reaching your goals.

I want better for you. I want you to set goals that you can reach. Goals that will help keep you and your team motivated.

Here’s my detailed breakdown of how to predict your business’s future revenue.

Pros and Cons of Doing Your Own Sales Forecasting to Predict Revenue

Some business leaders and sales teams decide to create their own forecasts. Is this a good idea?

Well, let’s have a look at some of the advantages and disadvantages of this.

Pro 1: You’ll Gain Valuable Insight

Since forecasting involves looking into historical and real-time data, you are forced to gain insight into your business’s health and overall growth. This information can help you set better future goals for your business.

Pro 2: You Can Decrease Costs

If you have a small business or startup, you’re likely trying to cut costs any way you can. Doing some essential tasks on your own, like revenue predictions, will help you save costs that you can channel into other areas of your business.

Pro 3: You’ll Know What to Focus On

There are many moving parts to a growing business. Understanding each component helps you achieve your overall business goals.

When you do your own sales forecasts, you’ll know what you need to focus more on to help your business continue growing.

For instance, if you predict that your sales will increase by 5 percent in the next three months, you can then allocate the necessary resources to help your sales team achieve this goal.

Con 1: Sales Forecasting Takes Time

As highlighted above, you’ll need to create revenue predictions that may be weekly, monthly, quarterly, or annually.

To create these forecasts and make an informed decision, you’ll have to look into historical data. This can be time-consuming to do on your own.

Con 2: Lack of Input From Outside the Company

Sometimes, it’s challenging to see the whole picture when you’re in the frame. Employing a team of planners from outside the organization can help you get someone else’s informed decision on your company. This can give you valuable insight into the health of your company.

If you’re …read more

Source:: Kiss Metrics Blog